Project Management

Can Agile Projects Self-Organize with a Fixed-Price Mentality?

PMI Pune-Deccan India Chapter

Sachin Dhaygude, a trainer and consultant in Project Management and Agile Methodologies, brings 15 years of work experience in the IT industry. He has worked with Fortune 500 IT services provider organizations like Cognizant Technology Solutions, as well as IT product organizations like SunGard.

Can agile projects self-organize with a fixed-price mentality? Before we explore the answer, let’s make sure we understand what a fixed-price contract is. PMI defines a fixed price contract as: “Price for the goods or services being procured is set at the outset and not subject to change unless the scope of work changes. Any cost increase due to adverse performance is the responsibility of seller. The buyer must precisely specify the product or services to be procured. Any changes to procurement specifications may increase cost to the buyer.”

There are some interesting aspects in this definition. It says “buyer must precisely specify the product or services to be procured.” This seems to be against the philosophy of agile; the second principle of the Agile Manifesto encourages us to “welcome changing requirements, even late in development.”

So can agile projects adapt to a fixed price mentality? The answer is “yes”, even though the typical fixed-price mentality violates the values and principles of agile stated in the Manifesto (refer to the last section). However, fixed-price contracts are the need of the market (typically in IT software services), so agile projects will have to adjust and offer a workaround.

Let’s examine the following scenario; Say that you need to respond back to a customer request …

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